"You can try to find new avenues to deploy the cash. You can look at new markets. Another possibility is to acquire companies that, presumably, will help you maintain your growth," Varaiya says of cash-rich companies' options. "And, of course, you can return cash to your shareholders by increasing dividends, or by paying dividends if you've never paid them before, or by buying back stock."
In recent years, a few tech giants have succumbed to that pressure and begun paying dividends.
Oracle initiated a dividend in 2009, and Cisco paid its first ever dividend in 2011. Apple reinstated its dividend in mid-2012. At the same time, Dell began paying quarterly dividends to shareholders. Most recently, storage vendor NetApp initiated a quarterly dividend in May of this year, followed by EMC, which paid its first quarterly cash dividend in July.
Stock buybacks are another way to create value for shareholders.
During the last three fiscal years, Microsoft spent $20 billion of its cash on stock repurchases ($4.6 billion in 2013, $4 billion in 2012, and $11.5 billion in 2011.) Cisco has also been a big share repurchaser over the last decade, spending $78.9 billion on buybacks since the inception of its stock repurchase program in 2001.
Earlier this year Oracle's board authorized an additional $12 billion in stock buybacks; Qualcomm hiked its share buyback program to $5 billion; EMC increased its program from $1 billion to $6 billion; and IBM added $5 billion to its repurchasing plans.
Besting them all is Apple, which announced a massive $60 billion stock buyback plan in April. It's the largest stock repurchase in history.
To buy or not to buy
While tech companies have been paying out dividends in record numbers and stock buybacks are booming, not all of tech's biggest names are on board.
Google remains a holdout. It doesn't pay a dividend and it's not buying back stock.
Yahoo, too, has so far resisted pressure to pay a dividend, though it did launch a $5 billion share buyback program in 2012. The company has said it's holding onto cash so it can make more acquisitions (during the second quarter, Yahoo bought nine companies, including Tumblr).
In the big picture, M&A activity in the tech sector has been disappointingly low during the first half of 2013. Cash-rich balance sheets have positioned the industry for a surge in deal-making -- but industry watchers are still waiting for that surge to occur.
During the second quarter, the U.S. economy showed positive momentum, stock markets continued to climb, and IPO activity rose -- yet the volume of technology deals dropped precipitously, according to PricewaterhouseCoopers.
Just 32 deals closed in the second quarter, a decline of 22 percent compared with 41 deals closed in the first quarter, PwC said in its quarterly report on M&A activity in the tech sector. On the positive side, the value of second quarter deals climbed 34 percent to $13.9 billion compared to $10.4 billion in the first quarter. But compared with the second quarter of 2012, deal volume and value decreased are still down sharply -- 46 percent and 58 percent, respectively.
"After technology deal volume reached a four-year low in the first quarter of 2013, the second quarter proved equally disappointing as volumes dipped again sharply and value recovered only slightly," PwC stated.
Still, there were five billion-dollar transactions that closed during the second quarter: Yahoo's $1.1 billion acquisition of Tumblr; Google's estimated $1.1 billion deal for Waze; Priceline.com's $1.8 billion acquisition of KAYAK Software; a Berkshire Partners-led $2.0 billion acquisition of Lightower Fiber Networks; and ASML Holding's $3.7 billion deal for laser maker Cymer.